Hotels/Restaurants/Casinos

Royal Caribbean sinks on reported loss, outlook

WilliamSpain

CHICAGO (MarketWatch) -- Shares of Royal Caribbean Cruises Ltd. were going down by the bow Wednesday, losing as much as 15% after the company turned in a loss for the second quarter and issued a downbeat forecast for the remainder of the year.

Royal Caribbean
RCL, -0.26%
lost $35.1 million, or 16 cents share, on the period, swinging from a profit of $84.7 million or 40 cents a share in the same quarter of 2008. Revenue fell to $1.3 billion from $1.6 billion as net yields decreased 17.9%.

Currency pressures, the economic downturn and the effect of the swine-flu scare on its operations in Mexico accounted for the loss and revenue drop, the company said.

"Obviously, the economy continues to be a challenge and the impact from the publicity surrounding H1N1 has been very frustrating," said Richard Fain, chief executive, in the earnings report. "However, the demand environment has shown remarkable stability, and with the extraordinary performance of our newest vessels and easier comparables, we look forward to improving yields in 2010."

Looking ahead, Royal Caribbean said it expect to earn 95 cents to $1 a share in the third quarter, compared with a current Wall Street estimate of $1.46 a share.

For the full year, the H1N1 virus -- which nicked 5 cents a share off the company's bottom line in the second quarter -- is expected to lower earnings by 27 cents a share,, with 18 cents of that in the current quarter.

Further, Royal Caribbean expects net yields to be off about 18% in the third quarter and 14% for the full year.

"We believe that [the company's] visibility remains low into the second half and close-in booking patterns will continue to impact net yields," wrote Steve Kent of Goldman Sachs in a note. "We remain sellers of the cruise stocks, as we believe expectations are too high and the industry's long-term risks are not going away," including oversupply and a lack of pricing power.

Shares were down $2.45 to close at $13.93. The stock was trading north of $30 this time last year before cratering all the way to $5 and change in March.

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